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Drug formularies in health exchange plans

Like many of you, we’re knee deep in evaluating how prescription drugs will be covered under plans offered through the health exchanges (HIX). While much has been going on behind the scenes, there still is a lot of uncertainty among the general public and some industry participants about what drugs will be covered, cost sharing amounts and the application of formulary controls, such as prior authorization and step edit requirements.

Although we’re aware that formulary contracting efforts have been underway for some time, we thought it might be helpful to provide some background on how formularies might be developed by health insurance issuers offering plans under the HIX marketplaces.

As most of our readers are likely aware, the Affordable Care Act is designed to ensure that health plans offered through the exchanges marketplaces provide a comprehensive package of ten items and services, known as essential health benefits (EHB). Prescription drugs are one of the ten categories of required benefits.

Under regulations issued by CMS to implement EHB requirements (45 CFR § 156.122), a plan must cover at least the greater of:

One drug in every United States Pharmacopeia (USP) category and class; or

The same number of prescription drugs in each category and class as the EHB-benchmark plan.

In other words, the most drugs that a plan would have to cover would be the same number of drugs covered by the benchmark plan, and the minimum number of drugs that would need to be covered is one. Issuers and manufacturers therefore would be well-advised to confirm the scope of drug coverage in a particular state’s benchmark plan.

As part of negotiations for formulary access, both issuers (and their PBM partners) and manufacturers need to keep a number of considerations in mind.

First, to comply with applicable benchmark plan drug counts, issuers cannot count a brand name drug and its generic equivalent as two different drugs. To satisfy applicable requirements, the listed products must be chemically distinct (similarly, two dosage forms or strengths of the same drug cannot be counted as separate drugs either).

Second, plans offered through a particular state’s exchange do NOT need to list the same exact drug(s) that are on that state’s benchmark plan. CMS has indicated that the key metric it will look at to determine compliance is the number of drugs, not the identity of the drug. CMS’ EHB bulletin indicates that “If a benchmark plan offers a drug in a certain category or class, all plans must offer at least one drug in that same category or class, even though the specific drugs on the formulary may vary.” (emphasis mine)

For manufacturers, this is an important item to note: even though your product may not be on the benchmark plan’s formulary, it can still be included on a HIX plan formulary if you are able to contract for coverage as one of the drugs in the applicable therapeutic class.

Third, as long as they comply with the drug count requirements, plans can and are using tiered formularies. As a result, expect to see plans utilize traditional multi-tier formularies with a generic tier, and preferred and non-preferred brand tiers, with widely varying cost-sharing differentials between tiers (and the implementation of traditional formulary controls like prior authorization and step edit programs).

Compare jurisdictions:Life Sciences: Product Regulation and Liability

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